Somnigroup International Inc. (SGI)

Somnigroup International Inc.'s liquidity ratios have shown some fluctuations over the past five years.

1. Current Ratio: Somnigroup's current ratio has improved from 0.99 in 2020 to 1.21 in 2021, staying relatively stable around 1.21 to 1.22 in 2022 and 2023, and then decreasing slightly to 1.11 in 2024. Overall, the current ratio indicates that the company had more current assets relative to current liabilities in most years, showing some capacity to meet short-term obligations.

2. Quick Ratio: The quick ratio, also known as the acid-test ratio, has been low in 2020 at 0.07, improved significantly to 0.29 in 2021, dropped to 0.07 in 2022, and then slightly increased to 0.08 in 2023, and to 0.12 in 2024. The quick ratio in most years indicates that Somnigroup may have had challenges meeting its short-term obligations using only its most liquid assets.

3. Cash Ratio: The cash ratio reflects the company's ability to cover current liabilities with its cash and cash equivalents. Somnigroup's cash ratio has followed a similar trend to the quick ratio, starting at 0.07 in 2020, increasing to 0.29 in 2021, dropping to 0.07 in 2022, and then increasing to 0.08 in 2023 and 0.12 in 2024. The cash ratio suggests that the company may have had limited cash available to cover its short-term liabilities in some years.

In summary, Somnigroup International Inc. has seen improvements in its current ratio over the years, indicating better short-term liquidity. However, the quick and cash ratios have shown more volatility, suggesting that the company may have faced challenges in meeting its short-term obligations using its most liquid assets.

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Additional liquidity measure

Somnigroup International Inc.'s cash conversion cycle has shown a fluctuating trend over the five-year period from 2020 to 2024. Starting at 55.88 days in 2020, the cycle increased to 61.08 days in 2021, indicating a lengthening period for the company to convert its investments in raw materials into cash from sales. In 2022, the cash conversion cycle further extended to 70.54 days, suggesting potential inefficiencies in managing working capital components.

However, there was a slight improvement in 2023 as the cycle decreased to 63.05 days, indicating a more efficient conversion process. Subsequently, in 2024, the cycle further decreased to 59.31 days, suggesting the company was able to optimize its working capital management, leading to a quicker conversion of inventory into cash.

Overall, the trend of Somnigroup International Inc.'s cash conversion cycle reflects some fluctuations, with potential areas for improvement identified in 2021 and 2022. Efforts to streamline working capital management in these areas could help enhance the company's cash flow efficiency and overall financial performance in the future.